Recruitment News and Views

New National Living Wage greeted with cautious optimism by UK businesses

London law firm Bircham Dyson Bell has published the results of its research into the views of UK entrepreneurs on the impact the National Living Wage will have on business. [via]

From 1 April 2016, the National Living Wage will come into force and workers aged 25 or over and not in the first year of an apprenticeship will, from then on, be paid a minimum of £7.20 per hour.

As part of its quarterly Entrepreneurs Optimism Index, Bircham Dyson Bell surveyed over 100 entrepreneurs and found that a third believe that the National Living Wage will have a positive impact on their business. Over 50% however are unsure as to whether the impact of the increased National Living Wage will be positive or negative.

Of those entrepreneurs who think that the introduction of the National Living Wage will have a positive effect on business:

Almost three-quarters think the chief benefit will be improved employee morale.

56% confirmed the introduction of higher pay under the National Living Wage will improve their reputation.

Over half (55%) think that the National Living Wage will improve the ease by which they recruit talent.

Almost half (48%) commented that productivity will improve or significantly improve.

Only 15% of those surveyed believe that the National Living Wage will have a negative impact on their business, but of those that do:

70% stated that increased labour costs are their main concern.

A third believe that the implementation of the National Living Wage will lead to job losses.

38% said that the National Living Wage’s introduction will reduce recruitment.

Almost half (48%) believe that investment will be reduced in other areas of business to meet the increased cost.

Half of the respondents think it will reduce employee reward packages and benefits.

“These statistics are reassuring because businesses are largely positive in their assessment of the impact the National Living Wage will have – with many seeing the benefits that higher pay can bring, such as increased productivity and improved employee morale. There are real concerns for SMEs, however, about how the extra cost will be met – with a third worried it will lead to job losses and almost half of the respondents believing it will reduce investment in other parts of the business,” Hollie Gallagher, Head of the Entrepreneurs Team at Bircham Dyson Bell commented.

“The new legislation will certainly change the landscape of pay for SMEs, but as half of respondents are still unsure as to whether the impact of the increased wage will be negative or positive, we wait to see how significant the consequences of its introduction will be,” Gallagher continued.

The businesses surveyed operate in a variety of sectors and 80% already pay employees the UK Living Wage of £8.25 per/hour or higher. The UK Living Wage, advocated by the Living Wage Foundation, is calculated independently and based on the cost of living.